Financial Leverage Exposes Shareholders to Financial Risk Because

question 15

Multiple Choice

Financial leverage exposes shareholders to financial risk because:

• A)competition forces companies to adopt an optimal capital structure.
• B)a company uses debt to increase the expected rate of return to shareholders.
• C)interest on debt needs to be paid even when operating performance declines.
• D)none of the given options.

Differentiate between adjusting entries, closing entries, and journal entries.

Calculate net income or net loss based on the information provided on the end-of-period spreadsheet.

Understand how the accounting cycle progresses from journal entries to financial statements.

Determine the effect of accounting entries on the company's financial ratios.

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Definitions:

Liabilities

Financial obligations or debts owed by a company to external parties, which must be settled over time through the transfer of assets, provision of services, or other means.

Future Transactions

Financial dealings or agreements set to occur at a future date, often involving the purchase or sale of goods, services, or assets.

Separate Entity Assumption

Business transactions are separate from the transactions of owners.

Liabilities

Obligations owed by a business to individuals or other entities, ranging from loans and mortgages to accounts payable.